Redstate: Economic Morons

I haven't taken down a right wing economic pundit in quite awhile. And even though I'm swamped right now, some columns just beg to be lampooned. Redstate recently published a column titled, "What Interest Rates are Telling Us About the Outlook". This is one of the most ridicules economic analysis I have ever read.

The author attempts to explain the Fed's latest interest rate decision. Let's begin:

It's now received wisdom that the US economy is in terrible shape and heading for even worse trouble. The main reasons for this are the twin crises in housing values (which is thumping the construction industry) and in the credit markets (which is putting the hurt on Wall Street firms).

In addition, the perception is taking hold around the world that the United States has let the wind out of the sails of the global economy. I think this is mostly because of the distress in the market for securities backed by US mortgages, including subprime mortgages. Of these securities that were issued during the recent US housing boom, it turns out that many, perhaps most of them, were purchased by investors in Europe.

So economic analysts (and television talking heads) the world over have been setting expectations for a big slowdown in US economic growth. Measurements of consumer confidence (which are believed to foretell future spending by consumers) have accordingly nosedived in recent months. And if the 1992 Presidential campaign is any indication, we can expect Hillary Clinton to start telling us that conditions are now worse than during the Depression.

Yes, that's right folks, it's the old liberal media talking down the economy. If only these people would stop talking, then everything would be alright. Never mind these inconvenient facts:

The biggest act of international economic cooperation since the Sept. 11 terrorist attacks is being put in place after demand for cash caused borrowing costs to rise. Banks and securities firms around the world have written down about $76 billion of assets this year after the market for mortgage-backed securities disintegrated.

The market for U.S. asset-backed commercial paper backed by assets such as mortgages and credit-card loans has shrunk for 17 straight weeks to $801 billion, falling 33 percent from its peak on Aug. 8, as structured investment vehicles continued winding down, according to data compiled by Bloomberg.

Or this:

Or this:

Or this:

No -- it's those evil talking heads blowing smoke about the economy. The moron continues:

Now the current crisis in credit markets is of course very severe, with many people in agreement that things are at least as bad now as they were during the liquidity shock last August, if not worse. And an interesting thing happens at this time of year: the demand for liquidity is considerably greater than usual, because banks and investment firms are closing their books, and they need to prove that their reserve levels are adequate. All else equal, this has the twin effects of raising short-term borrowing costs, while also making capital unavailable for business expansion.

This is one of the most incredibly ridiculous and stupid statements I have read. It shows an incredible lack of understanding about what is actually going on in the credit markets.

Financial companies lend money to each other all the time for various reasons. This has been standard operating practice for a very long time. But that lending has ground to a halt. The reason is "counter-party risk". This is the econogeek way of saying lenders are concerned that borrowers won't be able to repay even a short term (90 day) loan.

``The interbank market isn't working very well, and when the interbank market doesn't work very well globally, this creates some problems,'' Bank of Canada Governor David Dodge said in an interview today. ``It's part of our normal role as central banks to try to, if you will, unblock that.''

Remember all of those writedowns mentioned above? The $76 billion in writedowns (so far)? Lenders are worried that a borrower will be one of those institutions that writes down the value of its assets. And considering that nearly everyone in the financial market has written down their holdings, that's a damn good bet. In addition, financial institutions are worried about their own books right now because they may be the next company writing down their assets. As a result, no one is lending to anyone right now.

And the moronic crap continues:

What they evidently saw was that the economy continues to show surprising strength in the face of the decline in housing values in many parts of the country. Consumer spending is not down as much as many had predicted, and job creation is also quite strong. The US economy is more demand-driven than any other large economy in the world, and if consumers are taking a breather, it's not showing up in the data.

No, you jackass. This is what the Fed saw -- as they said in their policy statement:

Incoming information suggests that economic growth is slowing, reflecting the intensification of the housing correction and some softening in business and consumer spending. Moreover, strains in financial markets have increased in recent weeks. Today's action, combined with the policy actions taken earlier, should help promote moderate growth over time.

In addition, there was no economic happy talk in their statement at all. They are obviously deeply concerned about the economy -- as their statement suggests (try reading it sometime, you idiot).

And the moron isn't done yet:

The Fed also saw high and worrisome signs of inflation. I've said often enough here at RedState that the US is the only large economy in the world (except Japan) not suffering from significant inflation. Well, we apparently are now as well. The Fed prefers to measure inflation by looking at consumer prices minus food and energy costs. (In Europe, they use monetary aggregates like M2 and M3.) And there are indications that consumer prices may grow in the range of 2.6 to 2.9 percent next year. That's far above the Fed's target range of 1 to 2 percent.

Yo -- jackass. There are these things called charts. They depict price movements over time. Try reading one sometime. Like this one of agricultural prices:

Or this one of oil:

No -- no inflation at all. it just popped up suddenly over the last month. Those aren't price increases, they're mirages created by the liberal media to .... I give up.

Here's the frightening thing. People will take this guy at his word and buy into this crap. That's the terrifying thing.

So blackheed -- the author of this banal pap -- you are an economic moron. You have no economic analytic ability. You are an economic dolt. Please, stop trying to explain economics -- because you can't.

Comments

[Dendroica]

You're going to have to change that $76B figure.

Morgan Stanley just took a 5.7B charge.

[longnow]

Don't you love it when CNBC and Fox talk to
their demographic. A typical line after a
guest has the nerve to tell the truth that
the economic numbers put out are phoney
"Hillary is a regulate and tax mocrat"
They can't say tax and spend anymore so it's
tax and regulate. They know that the typical
day trader is so unhinged that they can't
spend more than a nano second to think of
something to say so it's "Hillary is the
neocommielezbo candidate" just like McCain was the "Manchurian Candidate".

[longnow]

Don't need me no damn charts...because I gots me
George Bush and he's all the charts I need.
Sides, all he's got to do is keep spinning
the figures and depending on Larry K on CNBC and the crooked right wing shooter from Trendmactexas
to catapult the propaganda. Just leave out
the price of oil, food and subprime.

[CallMeLiberal]

No need to root around for wingnuttery from the economic right -- I prefer the steady pounding from CNBC. I can't fathom what market need Murdoch sees for Fox Biz TV unless it's just to go lowbrow. CNBC is 99% pure Reaganomic palaver. They throw in an occasional liberal guest so they can shout him down. It's tax cuts (send the bill to the kids), no regulation, and the "free market," as long as "free" means "favorable to the fattest of cats." All economic ills are generally blamed on either Rep. Charlie Rangel or Sen. Hillary Clinton, though NY AG Andrew Cuomo was accused of killing the stock market a couple of weeks ago. It's Republican propaganda on a massive scale, and it runs from dawn to dusk 5 days a week.

[mdtaichi]

Right-wing "clever-as-Fox-y" economists are really Freudian in nature:
Ego; Super(sized)ego; and IDD (intentional dumb-down). Thx dubya.

[knosiswar]

Do you see any parody with the bank panics of the late 1800's, early 1900', that brought to America the Central Bank that our revered forefathers sought to escape and keep out of The Republic. All the central bankers gathered together, quite a pre-cursor to the looming one world bank they're trying to set up. Viva La Resistance!!

[mrcontinental]

I feel your frustration Bondad. How people blindly trust authority to TELL them what to think is beyond astonishing. Even as they watch this meltdown with their own eyes they continue to deny it. Madness!

And thanks for the excellent post, as always.

[mamacat]

In 2007, lying is considered an acceptable tactic by Republicans. I would like to think that it was not always so.

[themodernleader]

Bondad: If you are to be a great leader, you must behave as one. The two inverse repertriores that you are exhibiting are part of traditional leadership:
1. You are mixing emotions and issues: energies are dissipated in conjoining raw emotion with issues;
2. You punish negative patterns of behavior: The reprimands are devastating to the subordinate or subject.
These are two of the thirty inverse leadership behaviors of Traditional Leadership that turn an organization toward stagnation or precipitious decline.
The two actual, as stated, repertriores that you should consider are:
1. Separate issues from emotions; direct energies toward issue solving while isolating their emotional context.
2. Redirect negative patterns of behavior; reprimands are instructive.
These two repertoires, as stated, when applied with 28 other leadership repertoires result in Modern Leadership. Such leadership, over a period of time, leads an organization towards exemplary growth, achievement and marked performance of its mission, strategies and tactics.
You are to be commended for leading with firmness,consistency and resolve; exhibiting risk-taking and some candor in addressing organizational purposes; and relating to a strong set of values such as honesty, some courage, integrity, and sense of fairness.
Your goal must be to grow and develop those repertriores of great leadership within the job description of your organization.

[anastasiabeaverhousen]

History is simply repeating itself: 8 years of republicon rule has resulted in economic disaster. The only difference is: I'm not sure the dems can fix this incredible debacle that dumya has wrought upon this nation. dumya makes reagan look like a fiscal conservative.

[outnow]

Bondad,

You've done it again! The blockheads will believe Fox News even as they are evicted from their home in foreclosure, their job is outsourced, the dollar falls, they cannot afford food or gasoline, they cannot heat their house in the winter, and all the infrastructure falls apart.

My son just started his first job. He cannot afford to rent an apartment, fix his car, or pay his bills.

My first job was in 1963 while I was still in high school. Families could make it on a single salary. I paid $750 per year in "incidental expenses" at UCLA in 1966.

Ronald Reagan made what I did impossible for others.

[GJMandinka]

Sounds like more, Enron Economics. If you lie about the inconvenient facts, everyone invests with confidence; creating all the effects of the condition you desire! Allowing the crisis to get larger and deeper until reality catches up with you, crushes your financial empire like the straw and toothpics it's built on. Instead of a brief headline in the WSJ, now, it's a nation-killing economic nightmare.
A strong economy with a solid foundation can't be blown-down by some wind. Even 1/3rd of all Pigs know this...

[fourex]

Bravo, Hale. Facts, charts are a huge impediment to faith based economics.

[BillZBubb]

Bonddad, you might as well try to stop the wind as to take on right wing economic stupidity. No facts, no logic, no counterexamples can ever penetrate their ignorant skulls. They cling to a few simplistic beliefs that they expand to cover any contingency, and despite perpetual failure to understand or explain reality, they continue to believe.

A few years back a right winger was telling me how great the economy was because home ownership was at an all time high--higher than when Clinton was in office! I tried to calmly explain to him that the reason for this wasn't due to a great economy, but rather dangerously easy mortgage credit. Private debt, like public debt, was being piled up with great risk under Bush. Naturally, he wouldn't listen. Now, when I try to point out to him that very fact was the cause of our latest credit mess, he claims it's just overstated by the liberals! These clowns never learn.

[Kendo Nagasaki]

The underlying cause of this credit /banking "problem" is that most consumers are tapped out because of the rising cost of living and stagnant wages. The Federal Reserve controls the rate of inflation, not greedy workers.

How can you drive down wages and expect people to have money to spend at the same time, particularly when a lot of consumer spending was done by tapping into home equity, which is now much more difficult.

Capitalism seems to sow the seeds of its own destruction. Remember 1929 ?